Tuesday, November 19, 2002

A few weeks ago, Michael Lewis, writing in the Times, rapped New York
AG Eliot Spitzer for using email to make it look as if stock ratings
from Citigroup, among others, were being rigged to generate investment banking
business. I thought Spitzer had the better of the argument at the
time, but Lewis may have been partially right; a more newly unearthed
email from then-star analyst Jack Grubman offers a completely
different explanation:

"You know everyone thinks I upgraded [AT&T] to get the
lead for" a financing for AT&T's wireless unit, Mr. Grubman said
in a Jan. 13, 2001, e-mail to [a money-market analyst]. "Nope. I used
Sandy [Weill] to get my kids in 92nd St. Y preschool (which is harder
than Harvard) and Sandy needed [AT&T Chairman Michael] Armstrong's
vote on our board to nuke Reed in showdown. Once coast was clear for
both of us (ie Sandy clear victor and my kids confirmed) I went back
to my normal negative self on" AT&T, Mr. Grubman wrote. "Armstrong
never knew that we both (Sandy and I) played him like a fiddle."

All parties to this story have now issued strong
denials, including the 92nd St. Y, which takes
extreme umbrage at the notion that a mere million dollar donation
could compromise the integrity of its preschool admissions process.
(They are, in this respect, rather more punctilious than the real
Harvard, which is happy to
tell you that "legacy" applicants get favorable treatment, to
encourage donations from their parents).

And who knows? There may actually be less here than meets the eye
--- after all, the 1999 memo from Grubman to Weill entitled "AT&T
and the 92nd St. Y", which obsequiously begs for assistance with the
preschool, while at the same time promising to look further for
reasons to upgrade AT&T, does not actually say there was
any tie between the two activities. Maybe there wasn't! But if there
was no illegitimate quid pro quo for the AT&T upgrade, then, why,
oh why, did Grubman send email more than a year later saying there
was? His current explanation: he "invented a story in an effort to
inflate my professional importance."

Well, events leave no doubt that he invented a story somewhere
along the line. He said, in 1999, that AT&T was a good buy.
Events have proven otherwise. He said, in 2001, that he upgraded his
rating on AT&T to get help getting his kids into the right nursery
school. He says, now, that the AT&T ratings upgrade (which events
have shown to be unjustified) was based on his best professional
judgment at the time, and that the story he told last year, about
upgrading a stock to get his kids into nursery school, was just a fib
he made up to impress other analysts.